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|43
The Channel
less open to new ideas, good deals from suppliers, filling in on
needed items and repeating orders on good items. Generally,
they take up a whole raft of ‘business-limiting’ stances.
In my experience good buyers are ‘hungry buyers’ – they
are always on the lookout for a good deal or a new idea on
behalf of their customers.
When you are spending sleepless nights trying to concoct
ways of digesting product that does not sell or getting stocks
down, you are not aggressively in the marketplace seeking out
new ideas and good deals on behalf of your customers.
By mathematical definition, the more stock you have in
relation to your sales, the higher the proportion of the stock
that consists of things the customer has already rejected or
does not want.
Therefore, a lean stock with a hungry buyer is more likely
to contain things people what than a fat stock with a buyer
bunkered up trying to solve problems instead of exploiting
opportunities.
STOCK-TURN EQUALS PROFIT
Stock-turn equals profit. The faster your stock turns the more
money you make. The only valid reason to have stock around is
to support the sales level.
Stock Cover Summary:
•
21 weeks’ cover means 147 days of stock on hand. This
means for everything sold that day – customer has 147
things to choose from.
•
14 weeks’ cover means 98 days of stock on hand. This
means for everything sold that day – customer has 98
things to choose from.
•
7 weeks’ cover means 49 days of stock on hand. This
means for everything sold that day – customer has 49
things to choose from.
Heavy stocks make it hard for customer to buy as there is too
much to choose from – confusion rather than choice.
Using the best possible case, which is FIFO, i.e. ‘First In First
Out’:
•
If you run 21 weeks stock, things have to wait 147 days
for their turn to sell – this is almost 5 months.
•
If you run 14 weeks stock, things have to wait 98 days for
their chance to sell – this is over 3 months.
•
If you run 7 weeks stock, things have to wait 49 days for
their chance to sell – this is a month and a half.
Of course stock does not sell in ‘turn’ – the good things sell
faster and the new things will sell faster, which means the old
things get older. Once stock gets old, it costs more to liquidate:
•
The cost of clearing goods in season is usually 45% of the
original value.
•
The cost of clearing goods one year old is usually 75% of
the value.
•
The cost of clearing goods over one year old is usually
90% of the value.
This is an extract from John Hoerner’s book ‘How to Sell:
Recipes for Retail’.